Shares in small banks, buy now pay later apps and boutique technology companies are set to soar this month as speculators get excited about Australia’s economic recovery.
The Australian Securities Exchange’s benchmark S&P/ASX200 was 0.3 per cent weaker late on Wednesday afternoon.
This followed two strong trading weeks which saw the share market on Monday reach a level that was just 1.5 per cent below the all-time high of 7,197 points set in February 2020, a month before the Covid shutdowns.
While investors have this week been selling to make a quick profit, other shares have continued to climb with the broader share index at 6,997 points.
Shares in small banks, buy now pay later apps and boutique technology companies are set to soar this month as speculators get excited about Australia’s economic recovery. Pictured is a Bank of Queensland branch in Brisbane
Freelancer, a cloud-based platform matching employers with professionals looking for one-off work, has defied the market correction to see its share price soar from just 61 cents on Monday to 86 cents as of Wednesday – a mammoth 44 per cent increase in just two days. Pictured is chief executive Matt Barrie
Freelancer, a cloud-based platform matching employers with professionals looking for one-off work, has defied the market correction to see its share price soar from just 61 cents on Monday to 86 cents as of Wednesday – a mammoth 41 per cent increase in less than two weeks with the price going up by 8.8 per cent on Wednesday.
The share price rose even before Freelancer revealed, on Tuesday, that its net cash receipts after tax had soared by 12 per cent to a record $15.6million during the first quarter of 2021.
IG market analyst Kyle Rodda said risk-taking investors were particularly excited about smaller technology companies.
‘The small cap space has roared over the last few weeks and there’s a lot of interest,’ he told Daily Mail Australia.
‘There’s a real appetite to take risk in corners of the market that in more normal circumstances perhaps you wouldn’t see such risk taking occur.’
The Bank of Queensland was also regarded as a good investment to cash in on Australia’s economic recovery favouring financial stocks.
While its $9.10 share price was down 0.6 per cent on Wednesday, it still marked a healthy 3.4 per cent increase from $8.80 on April 15.
The Brisbane-based bank’s share price is still a lot cheaper than Commonwealth Bank ($88.17), Westpac ($24.98), ANZ ($28.42) and NAB ($26.21).
On Tuesday, BoQ updated its first half results for 2021 to clarify that its basic earnings per share would rise to 35.5 cents, up from the 34.3 cent figure quoted on Thursday last week.
Mr Rodda said smaller banks were benefiting from the strong sentiment that had propelled a recovery in the share prices of the big banks.
Investors are also getting excited about ZipCo, a smaller buy now, pay later app company
IG market analyst Kyle Rodda said risk-taking investors were particularly excited about smaller technology companies and were more willing to speculate and take risks
‘We’re seeing the strength that has more or less been expressed in the prices of the big four banks spill over into the mid-tier space as well,’ he said.
‘There’s the whole notion now with the Australian economy picking up, the housing market picking up, credit conditions improving, the financial sector as a whole is one that’s really going to outperform.
‘In situations where you see the market sentiment very, very strong, you get a broad-based move in the financial sector or in the banks and an element of that is spilling over into the way BoQ is trading at the moment.’
Job vacancies advertised on the internet in March rose by 19.1 per cent to a 12-year high of 238,700 to be up 96.4 per cent over the year, the federal government’s National Skills Commission revealed on Wednesday.
The economic rebound has also helped buy now, pay later apps, with Afterpay surging from $8.80 in March last year to $158 in February. It has since moderated to $121.82 as of Wednesday.
A smaller player ZipCo has also been volatile with his share price surging from $2 a year ago to $13.92 in February before dropping back to $8.75, a daily drop of 2.8 per cent.
Despite day-to-day volatility, Mr Rodda said speculators were still interested in both Afterpay and ZipCo based on optimism about future profits and not existing company fundamentals.
Mr Rodda said speculators were still interested in both Afterpay and ZipCo based on optimism about future profits and not existing company fundamentals. Pictured is Afterpay co-founder Nick Molnar with his wife Gabrielle
‘There’s still a very big desire to speculate in this space and try and take risks on buying buy now, pay later because really it’s the closest thing the ASX200 has had for a really long time to a market darling,’ he said.
‘Everybody loves Afterpay because it’s a success story in the Australian market and it attracts a lot of people who just want to trade in and out of the market to try and make a quick buck as well.
‘People are just trading on the hype, the narrative and trying to, at the very best, estimate a fair value of these companies that are very, very difficult to get at because their profits are expected to arrive so far in the future.’
Mr Rodda said ZipCo’s share price was more likely to surge in the short-term than much bigger Afterpay in a volatile market.
‘Anywhere in the buy now, pay later space, something like Zip is a little more sensitive to that sort of dynamic because the market cap’s a little bit smaller,’ he said.
